“This is the drop that overflowed the glass! I have been preparing for a while to make a strategic decision about what to do with the company I founded. If my electricity bill increases by 20 to 30 percent in a few months, I really don’t want to struggle anymore. There is no way I can pass that cost onto my foreign customers. They are already asking for lower prices every year. I have enough for a normal life for myself and my family; I do not want to subject my children to such shocks, and as for what will happen to the hundred workers who will lose their jobs, let those in the government worry about that. Enough is enough!”
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This is the reaction of one of the local entrepreneurs from the most realistic sector (production intended for export) after hearing from a colleague in the industry whose previous electricity supply contract had expired that the cost had jumped by as much as 30 percent (more on this in a special topic of this issue of Lider).
The Price of Populism
Prime Minister Plenković could take a day or two, turn off his mobile phone, and decide on one or several advisors who will think strategically about what to do. Or he could appoint a Minister for Development. As it stands, everyone is involved in searching for a new commissioner for Agrokor and maintaining the coalition in power. And in reality – chaos squared.
The government projected a GDP growth of 3.2 percent for 2017. On Wednesday, the estimate from the State Bureau of Statistics was published, stating that it grew by only 2.8 percent. It is good that we are still in the positive, but it is bad that the slowdown, predicted for the end of 2018, began already in 2017. And as it has started, there is no hope for stopping the slowdown. Every wrong government decision, and there are more and more of them, will show in future GDP.
Let’s take, for example, this story about the drastic increase in electricity prices for industry. The idea of energy from renewable sources, primarily wind, is well received by voters. They do not complain about it. It can even garner some votes in elections. Then a decision is made to subsidize such electricity production. Then foreign investors come in who will earn nicely and fill the budgets with taxes paid in their home country. And that goes smoothly.
>>> In the new issue of Lider: Electricity for industry increases by up to 30 percent
Then comes the moment when bills are issued to consumers. A government meeting is chosen on the last day of the hot summer vacation in August. The relevant minister calms the public with a promise that households will not receive more expensive electricity, even though the fee for renewable kilowatts is tripling. None of us in the media asked what would happen to the price of electricity for industry. It’s summer; our concentration has slipped… And then, six months later, shocks begin in the industry because neither entrepreneurs nor their managers, nor their associations, were really focused on the last day of August. Did citizens really benefit from the fact that the increase in electricity prices was passed onto industry?
Did citizens really benefit from the fact that the increase in electricity prices was passed onto industry? Short-term yes, long-term no. Because many will be left without jobs when high input prices burden industrial electricity consumers fail.
Short-term yes, long-term no. Because many will be left without jobs when high input prices burden industrial electricity consumers fail. To make the chaos complete, what they will save due to the unraised electricity price, these same citizens will pay dearly through other measures that are mostly unthought-out and imposed day by day. They will pay more for heating due to a deeply questionable legal provision on the installation of dividers in apartments with central heating. Or decisions to mandate the installation of condensing gas boilers in apartments, a move that did not pass in Germany. And in the case of dividers and boilers, the cream will be skimmed by foreign manufacturers. The domestic state apparatus seems to be vaccinated against the message that no law related to such a new obligation comes from Brussels without being the result of lobbying by some group of manufacturers. Our people, like geese in the fog, accept it wholeheartedly and practice strictness on the population.
Chaos Squared
Local entrepreneurs are increasingly criticized and devalued for not investing enough in new, digital technologies, not raising salaries for employees sufficiently, and not knowing how to increase productivity. And where is the average entrepreneur supposed to get money for new technologies when what is intended for that goes into buying social peace by shifting the electricity price from citizens to industry? Why even struggle when instead of relief we have additional burdens? Not all entrepreneurs will close their operations in the next few months. But it will be a creeping process, and then the public, led by politics, will wonder ‘like a chick to a worm’ when it is confirmed that our natural growth capacity is one percent of GDP per year.
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Where is the solution? In such a stuck society and politics, there is almost none. Perhaps Prime Minister Plenković should take a day or two, turn off his mobile phone, and decide on one or several advisors who will think strategically about what to do. Or appoint a Minister for Development. As it stands, everyone involved is engaged in searching for a new commissioner for Agrokor and maintaining the coalition in power. And in reality – chaos squared.
